Friday, February 11, 2011

Lord, NY Times Liberalism Can't Die Soon Enough

In this article, David Brooks argues that we have many really, really important and wonderful things to do, so we should turn the Old Fartz into hamburger and feed them to the scientists and teachers. REALLY. I'm not kidding.

Here is how this fool is reasoning, and this is why the current Democratic party is dead on its feet:

Over the past few weeks, I’ve had a chance to interview some amazing people. ...I’ve received a number of e-mails from people in the early childhood education movement who are already seeing states cutting their vital work. ...The foreign aid people, the scientific research people, the education people, the antipoverty people and many others have to form a humane alliance. They have to go on offense.

He then goes on to correctly explain that entitlements are going to grow and grow and eat up the entire budget, so:

All cuts must, therefore, be made in the tiny sliver of the budget where the most valuable programs reside and where the most important investments in our future are made.

Really? Really? It is difficult to claim that Social Security does not do "measurable good". If paying 400 teachers a net of $45,000 is going to mean that 7,500 Social Security recipients have to be reduced from benefit levels of $1,200 monthly to $1,000 monthly, minus the more than $100 it costs each month for Medicare premiums, then it is questionable if this is of net societal benefit.

Tell you guys what - Take a gander at the stats at this link and this link, and tell me how much room we have to cut Social Security. Try to keep in mind that the Social Security later Boomer only qualifies for full retirement at 67, so if they were retiring now, their average benefits would be less than shown.

The way early retirement benefits are reduced is very simple. They take your actuarial life expectancy at your full retirement age times your full retirement benefit, and reduce your early retirement benefit to make your net expected benefits no higher over your projected lifetime. So that increase in retirement age from 65 to 67 equates to about a 10% benefit cut, and if you have to retire 4 years early, you'll get a 20% cut. Needless to say, the brunt of this falls upon lower income earners. They have accumulated less savings; if they lose a job after age 60, most will be forced to take early retirement very quickly if they want to eat.

When most people figure out that every dollar spent on glitzy stuff like ethanol, high-speed rail and other wacky green ideas is going to be deducted straight from Social Security payments, and that if the federal government bails out the states, they will be taking money from poor people to give to people who are much better off, then modern liberalism will wake up and find itself dead. It's coming very soon. Modern liberalism has mutated into the common stereotype of conservatism; it does not regard individual human beings as important and it spits on the less fortunate.

It will have to be reborn again as old-fashioned liberalism before it can gain a following.

Some graphs:Almost no one gets Social Security of over $2,000 a month. Most get less than $1,300 a month, which is less than $1,200 a month after Medicare premiums.

Another point limousine liberals and Govt bureaucrats in general don't appreciate is that by 62+/-2 years old many in labor class just don't have it in them to go out in the cold and snow and toss hod.

Maybe with the service economy advent and cube denizens of Gen X and Y raising the retirement age will fly at a societal level, but for the mid and late Boomers it's a pretty obviously a regressive tax increase. Well, obvious unless you and everyone you know works 9-5 behind a desk located somewhere between Northern VA and Mid-town Manhattan.

The problem with Brooks and others of the northeastern elite is they have swallowed the magic beans. They honestly believe, in spite of glaring evidence to the contrary, that Federal government spending on education, energy, human services, etc., etc, is "investing" in the future.Trillions spent on education, energy, HUD, agriculture, and more with very little to show for it. The latest iteration is the HCR bill.

If the Repubs have any guts they will attack these departments and trim them mercilessly. It would not only reduce spending, but make the governmment far more efficient while reducing Federal meddling in state and local afffairs.

When I attend city council meetings, fully half the agenda is about complying with Federal mandates or how to get Federal grant money. People who don't think the Feds are deeply inserted into local issues should attend a city council meeting.

The EPA needs to have its sails trimmed also. Farmers here in Washington state are having to set aside as fallow as much as 36% of their acreage as setbacks from streams, seasonal creeks, and real rivers to prevent any possibility of pollution. The standards demanded by EPA are insane and unnecessary. Does anyone care about what that does to decrease food supplies? Not in the Federal government or the circles in which Brooks resides.

There are two ways to deal with the Social Security problem. First, change the way the benefits are calculated to an inflation adjusted computation rather than a wage growth computation. That would slow the rate of growth somewhat. Second, means test the benefit. Have those who make over a certain level of retirement income (as now) pay taxes on 100% (rather than 85% as now)of the SS benefit. Pay those in the upper half of benefit universe the amount they paid in, then reduce their benefit by half. Or some other such formula. Acknowledge that this is not a retirement program but a supplementary system to protect those who ended up with no savings. It is basically welfare, but has been masquerading as something else. Of course increasing the economic growth would help solve some of the issues.

Just one quibble--if the Republicans start cutting Federal services, they're going to have to make a great case for why it won't actually reduce the overall level of well-being for citizens. I think the case can be made, but they've waited until very late in the ball game to start educating their constituencies.

I disagree that the primary motivation for off-shoring is hourly wages. China has legal and regulatory obstacles that make it dicey to do business there--for example, U.S. marketers have essentially no legal recourse if their Chinese vendor decides to steal their product and sell it to someone else. That makes up for a lot of wage differences.

What makes offshoring to China so essential is that U.S. manufacturing plants are subjected to onerous taxes on their fixed plant, as well as monstrously expensive (and unpredictable) legal and regulatory burdens. The U.S. union-labor laws are another source of uncertainty. When U.S. companies balance the uncertainties of working in China vs. working in the U.S., China wins in most cases.

Fix the penalties and the uncertainties, and manufacturing will come back.

"About a dozen states — Oregon, Arizona, California and Iowa, among others — have call centers in state and federal prisons, underscoring a push to employ inmates in telemarketing jobs that might otherwise go to low-wage countries such as India and the Philippines."

Off-shore manufacturing locations are cheaper, no doubt. But that does NOT mean it is more profitable to go off-shore. That's what I'm talking about. It's easy to look at the wage differential and say it's driven entirely by wages, but when you actually do the analysis on whether or not to off-shore a process, it's not nearly so clear-cut. Actually, that "Hedge The Low-Wage Worker" article in part says something similar to what I'm saying.

If a company views their customer service as a pure cost center, then they will very likely go off-shore. If a company views their customer service as, well, customer service, as an integral component of the sales experience, they are less likely to do so. Similar arguments can be made for manufacturing. I've certainly known manufacturers who yanked processes back from Asia because they simply couldn't get things done right. Or their vendors scammed them, closed the plant, and re-opened two doors down with a new name, now as a competitor.

It takes an awful lot of financial, legal, and regulatory penalties to make a company close down a process that works well in the U.S. and move it to China. Wages are just an excuse. We've spent 40 years penalizing manufacturing and rewarding financial engineering. Reduce the penalties and the manufacturing will come back. It won't ever be the way it was in the 1950's, but it will come back enough.

Manufacturing in the US does not require matching wages in China or other low-cost countries: for many products, there are geographical advantages in making the product close to the market. Also, high wage encourage productivity improvements: if Henry Ford had manufactured the Model T in China instead of having to pay US wages, he might never have felt the need to introduce the assembly line.

There is no question that tax and regulatory policy has been very harmful to American manufacturing--above and beyond the specifics, there has been a general cultural hostililty toward manufacturing that has had malign effects. See my post faux manufacturing nostalgia.

I'm going to jump in on the side of Neil and David Foster on the manufacturing argument. Low wages are not the only reason for off shoring and many who have gone overseas have found it not as easy/profitable as they hoped.

I mentioned some time back the lumberman who moved his sawmill to Siberia when logging shut down here in the Pacific NW. Lots of easy to get, cheap timber. Lots of eager, low-cost workers. What a setup. Except that the Russian government and local bureaucracy nickle and dimed him to death and he had to keep armed guards around 24/7 to protect his property. Four years and he was out of there. He's in Canada now, working for a major forest products company. If logging was back in operation here he would be back here with his saw mill in a minute.

The problem here is the permitting for manufacturing facilities takes as much as five years and even after construction begins, some eco-terrist can get an injunction and tie you up in court for years. Even after manufacturing begins, if you are considered "dirty" (and most manufacturing is so considered by the eco freaks) they can shut you down using the EPA. We all want a clean environment, but the Greens want NO possibility of ANY pollution. They would get rid of all coal, gas fired, or nuclear power plants if they could. They would get rid of all all internal combustion vehicles. And jet airplanes.

The obstacles to manufacturing jobs here are not so much wages as is a hostile enviroment created by the environmentalists and the lawyers.

Same for jobs in mining, oil exploration, logging, and fishing. These are industries that create wealth by capitalizing on natural resources. But they are all under constant attack by the environmental crowd. That is a big factor that is crippling our economy.

Re Jimmy J's comment: In the link I provided earlier, I cited the example of a towboat operator in Seattle who had to wait more than **four years** to get permits for minor facilities improvements. This is not just about bureaucratic delay and inefficiency–there is something else going on:

“It’s all cultural,” says Eugene Wasserman, executive director of the Neighborhood Business Council. If it were biotech, it would get the green light.

“Biotech is cool. Propellers and pilings are uncool,” is how the government’s attitude is summed up by columnist Bruce Ramsey of the Seattle Times."

And increasingly, our country is dominated by people to whom coolness is all.

David Brooks is a smart and often insightful guy, and I'm actually surprised at how naive this column is. Old saying: "Never ask a barber if you need a haircut"..is it really surprising that people whose livelihoods and sense of self are invested in these programs think that they are worthwhile? Does Brooks really not know the history of claims of expertise in things like "early childhood education" and foreign aid, and how few of them turned out to be justified?

I once knew a talented, articulate, and persuasive engineer who was appointed to run what was essentially a new-product business unit. He argued that it wasn't reasonable for him to have expense budget targets like everyone else, since everything he was doing was an "investment." His management didn't go that far, but they did give him a lot of rope, financially speaking.

At least $10 million was spent, and the new product never came to fruition.

Well, I've managed to convince my liberal boyfriend with the heart of a capitalist of the wisdom of reducing regulation. I think it would be fairly simple to convince the rest of the public. We need someone to do a Ross Perot, to stand up with charts or a You Tube video, to show what's been happening.

I'd start with what they've done in the San Joquin valley, maybe Stockton. I'd show how productive that area is agriculturally. I'd show how many people were employed in agriculture and what food prices used to be. I'd show the snail darter that's being protected and the legal means used to take water away from the farmers. Then I'd show how high unemployment is in the area now and how much higher grocery prices are. People may be willing to shut down industry for cute spotted owls or even salmon. I don't think they are willing to do pay higher grocery prices for snail darters.

My personal fantasy for resolving the deficit is to start laying off younger bureaucrats and replacing them with people on social security. They'd have the experience to do those jobs and the jobs could be phased out as the new workers die off :)

The harder problem is how you convince people that more money is not the answer for our education problems. I believe we could save huge dollars if we left computers only in high school and above. We also need to open up teaching to those who don't have a master's degree. Maybe we could use those charts to show how much of the school day is actually spent teaching kids. I'd bet it's not a lot. A move back to older texts and away from textbooks that get replaced every couple of years would be a start.

David - I think the "cool" factor overrides all else, even regulations and law. Technically, we are approving a lot of things because they are in the "cool" column even when they are in fact more polluting than the things we have filed in the "dirty" column.

In short, our societal decision-making procedure approximates that of the average high school class president election.

"Mark - labor is much less a factor in manufacturing than you seem to believe."

We'll just have to agree to disagree on that, because I strongly disagree. China managed to add 100 million manufacturing jobs while we lost manufacturing jobs (see link below). Much of that is due to inefficiencies in production, but still.

As you point out (and I have in the past), it won't work anyway long-term because they will someday be automated away.

My main point here is that I firmly believe that wage differences are/were the primary motivating factor in moving production overseas. That's all I am saying. I'm surprised this theory is such a hard sell.

"While the United States was losing 1.4 million manufacturing jobs from 2002 to 2006, China was substantially increasing the number of workers in its manufacturing sector, according to a new report on Chinese manufacturing employment and compensation costs from the Bureau of Labor Statistics. Manufacturing employment in China during those five years increased by 10 percent to 112 million, about 100 million more than the number of manufacturing workers in the United States."

"Erin Lett and Judith Banister estimate that average hourly manufacturing compensation for China in 2004 was about 3 percent of the average hourly compensation costs of $22.87 for production workers in the United States for the same year."

"By manufacturing products overseas, in particular in third world economies, tremendous efficiencies are gained in the form of reduced wages, but are countered by the increased difficulty of monitoring the quality of their products and the actual working conditions in the factories."

In spite of the obstacles, the lower wages made it all worthwhile.

"Nike has been manufacturing throughout the Asian region for over twenty-five years, and there are over 500,000 people today directly engaged in the production of their products."

We may have to agree to disagree, but I think you're conflating multiple issues here.

Issue 1) Are hourly wages the primary factor in the reduction of U.S. manufacturing as a percent of GDP. I say no--the few times I have done the analysis for the purpose of deciding where to base a manufacturing process, prevailing hourly wages were somewhere near the bottom of the list. Total cost of employment (after complying with federal, state, and local regulations and adding windage for labor litigation and potential union rules and dues) was closer to the top, but other things were still more important. Cost of capital, and taxes on that capital, were big issues.

I have also worked on products where we didn't do the analysis, because there was no question at all whether the component manufacture would be outsourced. Any process that is considered "dirty" MUST be outsourced, due to environmental regulations and litigation. Wages had nothing whatsoever to do with it.

Issue 2) If manufacturing comes back to the U.S., will it create manufacturing jobs? We've had this discussion before and we disagree. But it's a separate issue from whether we can get net GNP high enough to pay the bills and keep Wal-Mart stocked.

Mark - all manufacturing creates jobs. Automated manufacturing creates less of them directly, but those it creates are at a higher level.

However most manufacturing-related job creation occurs in services, such as transportation, warehousing, distribution. And then there is the infrastructure investment created, which creates jobs.

Modern farming may employ far fewer people directly, but it still fuels a great deal in our economy. Manufacturing is the fuel for a healthy economy. It feeds money into the economy, whereas our current production/consumption imbalance constantly extracts money.

Unions are seen as a factor in offshoring and that is certainly true of the UAW, a union run by a bunch of thugs whio screwed both the rank and file and the car companies. Though a lot of foreign car builders have come here in the last 30 years. Their one demand - no union!

I was a union goon for 25 years. My union, the Air Line Pilots Association (ALPA) was unusual in that it was actually run by the members. (Most unions are run by professional union organizers - another term for slick shysters.)That doesn't mean ALPA didn't get greedy and forget that a healthy company was the source of their jobs. Union greed led directly to the bankruptcy of my old employer. I was long retired when that occurred, but it affected my pension in a bad way.

In spite of all that, I think unions can be useful in companies where there are many people doing essentially the same job. Rather than the company negotiating or dictating pay and working conditions, it is easier and maintains better employee relations as long as the union remembers that the company does not have a bottomless pit of money and the company respects that the employees have the desire to get a fair wage for their knowledge and effort.

I was always of the opinion that unions in service type industries should be legally bound not to strike, but, if an agreement could not be reached, proceed to arbitration. Strikes by pilots, teachers, governmment workers, etc. immediately affect the customers who are basically innocent bystanders. In the manufacturing and extraction industries, the companies always had a big inventory of product prior to the strike. That way the customers hardly noticed the strike unless it was ungodly long.

I'm not opposed to unions in principle, but government unions are bargaining with elected officials who, unless they are very tough and principled, are likely to give in to outrageous demands.

Labor law would be a good place to make some changes so this country could be more competitive with the rest of the world.

Jimmy - I certainly don't see that we are getting much bang for our buck with a lot of public spending.

My mother was a teacher, and she taught in public schools. If anything, the money we are throwing into education appears to have worsened primary education. As far as I can see it's because increasingly little time is spent on the basics.

The kids today aren't dumber. They aren't really any more deprived than the kids my father went to school with during the Great Depression, some of whom barely had clothes on their backs.

Yes, we have a lot of immigrants, but my dad (first generation) went to school in an area full of immigrant kids (upstate NY).

The difference is that there was rigid discipline and a much more intense focus on education back then.

Mark - there is a long term downward trend there, but it corresponds pretty well with the decline of manufacturing.

It is not just that type of job, though. It's the engineers, mechanics, programmers, maintenance, and materials supply businesses that directly are affected.

Not only that, but having an internal manufacturing base boosts exports. It is true, for example, that US ag is incredibly more mechanized and efficient and employs an incredibly small number of people to generate output compared to a century ago. But companies that make the equipment also export it.

The whole idea about intellectual capital and keeping the service/design part of the process was always laughable. It is far easier to outsource that than it is to outsource the actual production.

I may not always agree with everything commenters write or suggest (although I think you all have valid points to at least some extent), but after reading garbage like the linked article, it is profoundly refreshing to converse with people who are thinking about the real problems.

I'm not sure that Brooks can even fairly be described as naive. What is so disturbing about the article is that he seems convinced that the interests of a very small segment of the population SHOULD outweigh the interests of the average citizen.

* Berkeley Systems in Berkeley, California, founded in 1987, acquired in 1997, closed 2000. * Dynamix in Eugene, Oregon, founded 1984, acquired August 1990, closed August 14, 2001. * Front Page Sports, closed Jan 28, 1998.[4] * Impressions Games in Cambridge, Massachusetts, founded 1989, acquired 1995, closed April 2004. * Papyrus Design Group in Watertown, MA, founded in 1987, acquired 1995, closed May 2004. * PyroTechnix, founded as Computer Presentation, acquired February 1996, closed in 1999. * Yosemite Entertainment in Oakhurst, CA, formed in 1998, closed in 1999 then sold to Codemasters that year.[5] * As of late 2008-09 Sierra Co. was aborted and shut down.

Should have called it Old Yeller Entertainment, because one by one the mostly independent divisions were taken out behind the woodshed. I left in 1999 by choice after surviving many rounds of layoffs.

There's three kinds of discipline: self-discipline, the best kind, where you know something's bad for you so you don't do it; discipline from other people, which costs more and doesn't work as well, but reduces the amount of trouble you get into (this would be called regulation); and universe discipline (this would be called a crisis, which contrary to Raum Emanual, is a disaster, not an opportunity, no matter what Cloward-Piven strategy says).

What we have been watching the last 70 years is the steady march from a society organized around the first principle to a society condemned to the last principle.

"Self-discipline, discipline from other people, and universe (universal?) discipline"....by the last, I think you mean problems not being dealt with on a low enough / local enough level, so that they propagate and eventually cause a crisis effecting the whole society. I've used the analogy of the Penny in the Fusebox...you can keep the lights on for a little longer, but will likely burn the house down doing it.

Fascinating discussion, especially for a liberal Democrat like myself. I think there's a case to be made for some regulation (unless we want to go back to the era of 80 hour work weeks and child labor), but I agree that we can be over-regulated. Everyone (and I mean *everyone*) sees the government as a tool to do what's best for them, rather than for the country (an unfortunate by-product of the cynicism of the Republicans since the 1980s as well as actual failings of government).

What's striking to me is that some people in this thread seem to think that we can race to the bottom--if we only cut taxes and make business less regulated, we'll revive our manufacturing. Not happening, folks. Any amount of taxes we cut, the Chinese (or Vietnamese, etc, etc) can cut by half again. Plus, I think that Americans are wealthy enough to not want those 'dirty' industries mentioned. And guess what? When a country gets rich enough, the citizens tend to make that decision.

We need to compete based on our comparative advantage--agricultural wealth, innovative society, wealthy consumers, educated workforce, legal structure, and large domestic economy. I don't know how to do that best, but I do know that the government has incentive to improve these comparative advantages, as opposed to (largish) companies, which have very little incentive to care about locality.

I guess it's a matter of trust. I dislike trusting either big business or big government, but if I have to pick one, I'd say government--at least you can vote the bastards out.

And then, I guess the answer always comes back to politicians--I wish we had a smaller republic where politicians would be more responsive.

Regarding Brooks, he is a ruling class wannabe: he alone has the intellectual, moral, and, yes, artistic qualities necessary to decide what is good for the people. And the ultimate expression of ruling class hauteur, is of course, the power of life and death over people. How did the American people grow so inattentive as to let this ruling class assume all levers of authority in our society?

Regarding unemployment in the US: any firm deciding where to make direct investment sees the monstrous contingent liability of $1 trillion dollar Fed deficits as far as the eye can see, and the equally disastrous because equally open-ended contingent liability of Obamacare, and they quite rationally choose to move many operations overseas, or purchase from overseas. Add to this the virtually unlimited authority given to EPA, and suddenly you can understand why the US' natural rate of employment has drastically fallen.

The points you make on education I don't disagree with, but the larger point is, what's wrong with the k-12 educational system in this country? Why do school districts sit idly by as more and more high school seniors graduate with a 3rd grade reading ability?

The answer is that k-12 education is provided by monopolies. School districts possess the sort of monopoly businesses can only dream of: not only do they have a $7 -9000 per pupil cost advantage over any potential competitor, truancy laws guarantee that their revenue stream will never be interrupted. That is why they can ignore the parents; and run the schools any way they please. And the fact that school boards are elected guarantees that the people running the schools will judge the major decisions using one criteria: will it help me get re-elected? This might seem ok, but you must realize that school board elections are very easy to influence with rather small amounts of political contributions, and the rewards of possessing the ear of school board members is very beneficial to local builders and realtors, and many other members of the chamber of commerce. How is that? Nothing sells real estate like a brand new " state of the art " school. In some states, local school boards have the authority to mandate school attendance to age 18 - very useful to pols in keeping new, low wage workers from entering the workforce, making the unemployment problem worse, and darkening the local state representative's chances of re-lection.

You say increasingly little time is spent on basics? That is true, but actually not very important to those who aim to suborn school boards, and have the means to do it. The trend to cutting instructional budgets is a nationwide trend, and a guilty or ignorant school board can always find an academic who will present research - for a fee - that shows that new, research-based methods of instruction actually will achieve the desired educational outcomes with only a fraction of the instructional hours required in more traditional approaches.

A lot of the parent and student apathy would, I think, disappear, if the parent's saw the schools respond to their wishes. As it is, the school's reply is always some version of " we know best ", or " state or Federal rules require it".

Getting rid of teacher's unions inordinate influence is currently much in the news, but is only a necessary, but not sufficient condition for improvement to occur in public schools.

What is so terrible about child labor? Children used to be considered valuable. They were expected to work, starting with chores and moving to paying work. They contributed to the family's income.

In this area, teenagers used to work cherry harvest. When you sort cherries, you work 10 hour days straight through, usually about 21 days straight. It gave them spending money for the school year. Then they put in restrictions, limiting the amount of hours they could work daily and limiting the total to 60 hours a week. The fruit shed stopped hiring teenagers. It was too much of a headache to staff the shift. I guarantee you that the teenagers could handle the long hours a lot better than I could!

However most manufacturing-related job creation occurs in services, such as transportation, warehousing, distribution.

Missing from nearly every discussion about this is China's subsidization of the shipping industry. If it's a global market and you can get practically free shipping out of China, that is where you will go. Hourly wages could quadruple there and if the shipping is free the manufacturing will remain.

I don't see how China can continue to subsidize shipping beyond labor. Energy costs will eventually get them.